15 or 30 Year Mortgage: Startling Facts About Paying Off Your Mortgage

– So how do you choose the best mortgage? Well, this is kind of a loaded question and I’m totally aware of the controversy between a 15-year mortgage
versus a 30-year mortgage. I mean, I get it. You want to pay the
least amount of interest, you probably want to be in
debt the shortest length of time possible, and you really want to be in a position
of cash flow and control. However, you may not realize that those objectives are competing. I want to help you understand how to make the best decision financially, and I also want to put in a disclaimer, no matter what the math says, if you have an emotion that leads you to make a certain decision, so that you have peace of mind, you are going to want to go with your gut. But I do want to talk
you through the math, because often, the
numbers can be misleading and get us to focus on the wrong thing. So the first thing that people do that is focusing on the wrong thing is looking at interest rate alone. Now, interest rate is kind of funny, because it’s actually used by the banking and financial industry to
lead you to the decision that makes the most sense for them. Because here’s the thing, if you have a lower interest rate, you’re going to have less
dollars going out in interest, true, and it sounds like a great decision to go with something that
has the lower interest rate, which usually would then lead
us to a shorter mortgage, because 15-year mortgages have smaller interest rates
than 30-year mortgages. However, if you look at the
volume of dollars each month that you are paying to
the mortgage company, you’ll realize that you are having more dollars flow out of your hands. That means a bigger expense to you, and more cash flow into the
control of the mortgage company. Another thing that people look at over the long haul
is how much total volume of interest am I paying? Again, this can be misleading, because while you might pay
a higher volume of interest, does it really matter over
time what that looks like, or do we want to maximize
our dollars today, because here’s something that you may not have
thought about before. Your today dollars are more valuable than tomorrow’s dollars. What do I mean by that? If we look at the impact of inflation, it erodes the purchasing
power of your dollars. I mean, think back to
Little House on the Prairie, and they got two pennies for Christmas and they could use that to spend on multiple pieces of candy. I still remember the story. Now, it’s not the same today and the reason is because of inflation, meaning that if you
have a mortgage payment of $3000 per month today, 30 years from now, that
mortgage payment’s gonna feel like a whole lot less money, and it’s going to have purchasing power that will equivalate to
less in your personal life. Now, the bank and financial industry knows this just as well as you do, and they know that having dollars flow into their control today is more valuable than
dollars in the future, so they would rather you make the biggest payments possible today, because that’s more
money in their control. Now, again, I’m not faulting
the banking industry and the mortgage industry. They’re in business to make money, but what you wanna do is you want to think about how does
this put me in a position of maximum cash flow and maximum control? So here’s how I would look at the entire mortgage question
to put you in the position of maximum cash flow and control. Find out how to get the smallest payments. When you have a low payment flowing out of your hands each month
in the terms of an expense, you’re in a position where you’re keeping more of your dollars. Now, when you keep more of your dollars, that means you have more money
to put to work to create time and money freedom, means
you have more to save, and more to invest in cash flowing assets. So it’s more valuable to
you to have a lower expense. Now, again, remember, you’re not in debt if you own more than you owe. That is something that most
people fail to understand and they feel that just because they have a
mortgage, means I’m in debt. It’s not true that you’re in debt, just because you have
a liability or a loan. You’re only in debt if you
have negative net worth, meaning you have more
liabilities than assets. The other thing to look
at is what is the best stewardship of your dollars, meaning this, where can you get the highest
return on your investment? Your house is not the best
place to store your cash. First of all, it’s a
major lifestyle expense. It’s not an investment. Money put into the four walls of the house has the
potential to fluctuate up and down in value and just because you have a paid-off mortgage, doesn’t mean your house
will appreciate faster. That means your rate of return
inside your house has nothing to do with whether you have it paid off or whether you have a mortgage. So use that to consider how to have the smallest payment by having the longest mortgage, even if that is a higher
interest rate and even yes, if you pay more dollars
in interest overall. What you want to focus on is having the most dollars
in your control today. That allows you then to put
that money into savings, put that money into investments that create cash flow for you and build time and money
freedom much more quickly. Hey, I hope you liked this video. If you did, click the link in the description box
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